Tougher Penalties for Oil Theft in Mexico Unlikely to Fix Problem

Mexico has taken steps to toughen up penalties against people convicted of stealing crude oil, but it is unlikely that these measures will markedly affect the prevalence of this crime, nor its popularity for organized crime groups.

As reported by El Pais, Mexico’s Congress recently approved a measure that increases the range of prison sentences for anyone convicted of stealing oil or natural gas to 15 to 25 years. This represents a substantial increase from the 8-14 year range that was previously in place, and puts the outer limit of a prison sentence for oil theft in the same ballpark as one for murder.

The increased emphasis on punishing the crime stems from its exponential growth in recent years, which has resulted in massive losses for the state oil company Pemex. As InSight Crime has reported on multiple occasions, over the past decade theft of oil and gas from Pemex pipelines went from being unheard-of, to a minor nuisance, to a major thorn in the energy industry’s side.

In 2010, for instance, Pemex said that more than 1.5 million barrels of crude was stolen. Since then, the problem has only grown worse. In 2014, Pemex’s monetary losses from theft exceeded $1 billion, and though the numbers are not yet available for last year, the frequency of oil theft — typically enabled by illegal taps on isolated portions of pipeline — spiked markedly in 2015.

The growth in oil theft stems from its increasing popularity among organized crime groups, especially the Zetas. Pemex facilities in Zetas-controlled states like Nuevo Leon and Veracruz were some of the first to be widely targeted, and a large percentage of those arrested in relation to oil theft have ties to the Zetas. On at least one occasion the group was operating a Pemex-owned well for its own benefit. More recent statistics show, however, that the practice has grown widespread in states where other gangs are dominant, such as Mexico State and Guanajuato.

The negative effects of oil theft are two-fold. Not only does it help boost profits for violent criminal groups, it also undermines the success of what is arguably Mexico’s most important institution, a major source of government revenue and development.

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While the government’s desire to protect the oil industry is understandable, the tougher penalties are unlikely to have more than a marginal impact. Studies have long shown that increasing the likelihood of being caught and punished is a more effective deterrent for criminals than upping the severity of the punishment. That is, Mexico would be better off subjecting 90 percent of oil thieves to a year in prison than subjecting 10 percent of oil thieves to 50 years in prison.

Unfortunately, Mexican authorities have been unable to make sufficient headway on this score, despite substantial increases in the number of arrests. During the first nine months of 2014, Mexican authorities were able to arrest more than 1,400 people suspected of oil theft, which represented a 57 percent uptick from 2013. From 2007 to November 2012, the total figure was reportedly less than 700.

At the same time, it is not clear that the arrests have led to convictions and prison terms. Furthermore, even limiting the analysis to arrests alone, punishment has been limited in other ways. According to Noel Maurer, an associate professor at the George Washington University, approximately 11 Pemex employees are arrested annually for helping to facilitate oil theft, despite their obvious role in enabling the theft and its subsequent processing and resale.

In other words, the authorities have been unable to address the key factors at the heart of this criminal activity. While increasing penalties is a good way for politicians to look concerned and active, absent other changes, it has a limited impact on criminal incentives, and is therefore highly unlikely to do much to reduce the crime.

In many ways, the political system’s inability to address the vulnerabilities at Pemex reflect its failures on security in general. Politicians across the nation have made a show of getting tough on crime, from proposals to bring back the death penalty to increased purchases of sophisticated arms. But the system has been unable to deal with root causes that enable sophisticated criminal groups, namely, the widespread corruption that results in police and Pemex officials alike working to facilitate, rather than prevent, illicit activities.

In other ways, however, Pemex has shown creativity in complicating life for oil thieves. It has sued several US companies for purchasing stolen oil and gas, making peddling the stolen goods much more difficult and presumably reducing profit margins. Pemex has also reduced the quantity of refined products in its pipelines, making it far more likely that a criminal group would need to refine stolen oil before finding a buyer, once again reducing the thieves’ profit margins.

Unfortunately, these novel measures have not stopped the flow of stolen oil — nor the money it puts into the coffers of criminal groups. It may be that reducing profit margins only encourages more criminal activity, given the ease with which these groups can scale up their operations. Whatever the case, Mexico’s most recent idea to attack the problem is plainly insufficient.

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